If you own investment real estate and your CPA has never mentioned cost segregation, you are not alone. It is one of the more consistent patterns Brian Kiczula of CostSegRx encounters: investors who have been taking straight-line depreciation for years on assets that qualified for something better, simply because no one told them otherwise.
The reasons for that silence are more practical than you might expect.
The Cost Barrier That Shaped a Generation of Advice
For a long time, cost segregation studies were expensive. Conducting one on a smaller residential property could cost thousands of dollars, sometimes more than the tax benefit it would generate. CPAs managing clients with modest portfolios did the math and defaulted to straight-line depreciation across the entire asset. It was the conservative call, and for many properties at the time, it was probably the right one.
The problem is that the default stuck even as the economics shifted. Engineering-based studies can now be conducted cost-effectively on smaller properties. Not automated reports, not online tools, but actual engineered studies where someone examines the property and produces an accurate analysis. Kiczula is emphatic about the distinction: “I’m not talking about a DIY cost seg study or an online calculation. I’m talking about an engineered study where someone is looking at the property and providing an accurate study back.”
Many CPAs have not updated their thinking because their clients have not pushed them to.
A Knowledge Gap, Not a Failure
The second reason is simpler. Not every CPA specializes in real estate investing. Some have clients who own property, but not enough of it for cost segregation to become a regular part of their practice. That does not reflect poorly on them as tax professionals. It does mean the investor may need to raise the subject themselves.
How to Have the Conversation Without Creating Friction
The approach Kiczula recommends is straightforward. Do not commission a study first and present it to your CPA after the fact. Get a complimentary estimate of benefit, bring it to your tax preparer, and let them review it against your actual tax situation before anyone moves forward.
The estimate puts real numbers on the table. It shifts the conversation from a general pitch about cost segregation to a specific question about whether the depreciation applies usefully to your situation, which depends on factors like whether your income is active or passive and how you intend to use the losses.
When the CPA Is Right to Push Back
Kiczula does not treat every CPA objection as an obstacle to overcome. There are situations where a cost segregation study genuinely does not make sense: investors planning to sell soon who would face depreciation recapture, or investors whose tax picture means they cannot use the losses the study would generate. In those cases, he has walked away from the engagement himself.
If the objection is based on an actual analysis of your situation, that deserves respect. If it is based on unfamiliarity with how cost segregation works today, an independent estimate gives both you and your CPA something concrete to evaluate together.
About CostSegRx: CostSegRx is an engineering-based cost segregation firm led by Brian Kiczula, a member of the American Society of Cost Segregation Professionals. The firm works with residential and commercial real estate investors nationwide. CostSegRx provides complimentary estimates of benefit and supports investors and their CPAs through the full reporting process. Learn more at costsegrx.com or call (888) 850-4155.
Disclaimer: This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.
Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.
